Oil falls below $43 ahead of Doha freeze meeting

Oil Export Chart 201215 April 2015, London — Oil prices fell on Friday in thin trade as analysts said a weekend meeting of major oil exporters would do little to help clear global oversupply quickly even though it could provide a floor for the market.

Oil producers led by top exporters Saudi Arabia and Russia plan to meet in Qatar on Sunday to discuss freezing output around current levels in an effort to contain a glut that sees some 1.5 million barrels of crude produced every day in excess of demand.

Traders said they were reluctant to take on new positions ahead of the meeting, which takes place outside market hours.

“Momentum is building behind an agreement that likely excludes Iran (and potentially Libya). While there will likely be little effect on the physical market an agreement would represent an important psychological shift in setting oil prices,” investment bank Jefferies said on Friday.

Brent crude futures LCOc1 were at $42.94 a barrel at 1148 GMT, down 90 cents from their previous close after falling by more than $1. U.S. West Texas Intermediate (WTI) futures CLc1 were also down 85 cents, trading at $40.65.

Yet with discussions among producers focussing on freezing output levels rather than cutting them, most analysts said they had little hope for a Doha deal that reduces the global oversupply.

The glut has pulled down crude prices by as much as 70 percent since mid-2014.

“The Doha meeting does not materially change the oil market balances,” Barclays bank said.

Instead of pushing prices up by much, Barclays said an agreement could prevent prices from otherwise falling further.

“If recent supply-side fundamental support holds and the market’s expectations for a credible statement and commitment are met, the meeting could help prevent prices from falling back to the low $30 range.”

Energy consultancy Wood Mackenzie said: “Even if an output freeze is announced, we do not expect a genuine one to occur during the remainder of 2016.”

Instead, Wood Mackenzie said it expected “OPEC output to rise 0.5 million barrels per day, b/d, year on year in 2016, with most of that growth coming from Iran and Iraq, both of whom have indicated plans to grow output in 2016.”
*Dmitry Zhdannikov, Henning Gloystein in Singapore; editing – Jason Neely – Reuters

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